nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2017‒05‒14
fifteen papers chosen by

  1. Environmental efficiency and abatement efficiency measurements of China¡¯s thermal power industry: A data envelopment analysis based materials balance approach By Ke Wang; Yi-Ming Wei; Zhimin Huang
  2. Rent The Productivity of Nations By Oleg Badunenko; Daniel J. Henderson; Valentin Zelenyuk;
  3. Where are the economies of scale in Canadian banking? By Robert McKeown
  4. Costs, size and returns to scale among Canadian and U.S. commercial banks By Robert McKeown
  5. Testing R&D-Based Endogenous Growth Models By Peter K. Kruse-Andersen
  6. Land Property Rights and Agricultural Productivity: Evidence from Panama By Gabriel Ivan Fuentes Cordoba
  7. Shadow prices for a small open economy under uncertainty: Which expected values are valid By Clive Bell
  8. Evaluation of the Fruit Tree Productivity Project in Morocco: Design Report By Evan Borkum; Anitha Sivasankaran; Jane Fortson; Kristen Velyvis; Christopher Ksoll; Elena Moroz; Matt Sloan
  9. Calculating the excellence shift: How efficiently do institutions produce highly cited papers? By Bornmann, Lutz; Wohlrabe, Klaus
  10. Can agricultural aspirations influence preferences for new technologies?: Cropping systems and preferences for high-efficiency irrigation in Punjab, Pakistan By Bell, Andrew R.; Ward, Patrick S.; Ashfaq, Muhammad; Davies, Stephen
  11. Who gets the urban surplus? By Collier, Paul; Venables, Anthony J
  12. Financial Liberalization, the Institutional Environment and Bank Efficiency By Jiang, Xuanchao; Hermes, Niels; Meesters, Aljar
  13. Why is Europe Falling Behind? Structural Transformation and Services' Productivity Differences between Europe and the U.S. By Buiatti, C.; Duarte, J. B.; Saenz, L. F.
  14. The Production of Knowledge: A Meta-Regression Analysis By Pedro Neves; Tiago Sequeira
  15. Bank Credit, Liquidity Shocks and Firm Performance: Evidence from the Financial Crisis of 2007-2009 By Tamara Vovchak

  1. By: Ke Wang; Yi-Ming Wei (Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology); Zhimin Huang
    Abstract: Appropriate measurement of environmental and emission abatement efficiency is crucial for assisting policy making in line with constructing a more sustainable society. The majority of traditional approaches for environmental efficiency measures take pollutant emissions as either undesirable outputs or environmentally determined inputs which suffer a limitation of not satisfying the physical laws that regulate the operation of economic and environmental process. In this study, we propose a DEA based approach which is combined with the materials balance principle (MBP) that accounts for laws of thermodynamics to jointly evaluate environmental and abatement efficiency. This approach is along the line of weak G-disposability based modelling but is an extension to existing models that in our approach the identification of possible adjustments on polluting mass bound in inputs and outputs, and potential adjustments on abatement of pollutants are all included. The overall environmental efficiency measured by this approach is decomposed into the measures of technical efficiency, polluting inputs allocative efficiency, and polluting and non-polluting inputs allocative efficiency with the emphasizing of incorporating pollutant abatement activities. Accordingly, new measures of abatement efficiency are proposed which help to identify the pollutant abatement potential that can be achieved from end-of-pipe abatement technology promotion associated with polluting input quality promotion and input resources reallocation. Furthermore, several global Malmquist productivity indices for identifying the changes on environmental and abatement efficiency are proposed. This approach is applied to China¡¯s thermal power industry and some empirical results verifying the necessity of introducing the MBP are obtained.
    Keywords: OR in environment and climate change; Electricity generation; Emission reduction; Materials balance principle; Pollutant abatement
    JEL: Q54 Q40
    Date: 2017–04–08
  2. By: Oleg Badunenko (Portsmouth Business School); Daniel J. Henderson (University of Alabama, Tuscaloosa); Valentin Zelenyuk (University of Queensland);
    Abstract: This paper scrutinizes research on the productivity of nations with a particular focus on the preceding 50 years. First, we briefly synopsize ‘classic’ studies on economic growth and convergence of nations. The main criticism of these studies is that they did not account for potential inefficiency of countries. The production frontier literature attempts to deal with this issue and we give a brief introduction to it with a focus on data envelopment analysis. One central point of this review is the analysis of sources of productivity growth before and after 1990, a period of time, which appears to be a point of a structural change in growth patterns around the world. The second thread of this paper concerns the forces behind the transformation of the worldwide productivity distribution from a uni-modal to a bimodal distribution during the 1990s. Finally, we emphasize caveats and outline possible directions for future research.
    Keywords: Convergence, Bi-modality, Catching up, Data Envelopment Analysis, Efficiency, Economic Growth, Human capital, Income Distribution, Penn World Tables, Physical capital, Productivity, Stochastic Frontier Analysis, Technology, TFP
    JEL: D24 C14 C43 O47
    Date: 2017–05–03
  3. By: Robert McKeown (Queen's University)
    Abstract: Using a new data set from the Office of the Superintendent of Financial Institutions, I conduct an in-depth study on cost efficiency and returns to scale (RTS) in Canadian banking. I estimate a transcendental log cost function for the six largest Canadian commercial banks which account for approximately 90 percent of chartered bank assets over the 1996-2011 sample period. The minimal amount of firm entry and exit simplifies many difficulties in the analysis, and the panel dynamic ordinary least squares estimator (PDOLS) provides less biased results than the fixed-effect OLS. Departing from previous studies in banking, I calculate whether the estimated cost function satisfies the microeconomic properties of a monotonicity and price concavity. To my knowledge, this is the first paper to find evidence of constant RTS among the Canadian banks. The result is robust to a number of different asset and price specifications. Furthermore, there is little evidence to suggest cost inefficiencies among the large Canadian banks. This is true whether the Greene (2005) true fixed effects ML estimator is estimated or a distribution-free approach is measured. Combining these two results, the large Canadian banks managed costs efficiently and minimized costs from 1996 to 2011.
    Keywords: Bank, Commercial Banks, Financial Intermediaries, Retail Bank, Canada, Canadian
    JEL: G21 L89
    Date: 2017–04
  4. By: Robert McKeown (Queen's University)
    Abstract: I compare returns to scale in the U.S. and Canadian banking system from 1996 to 2015. I estimate a parametric trans-log cost function and, for robustness, an inputoriented distance function. I do this in a way that is commensurate with the limitations of these models. Among the ten largest commercial banks, I find evidence for small but statistically significant increasing returns to scale (RTS). This reflects the descriptive data that offers little evidence for extremely large scale economies. Comparatively, I find constant RTS for the Canadian banks. They paid fewer costs per asset, particularly lower labour costs and legal penalties. Comparing income statement items, I find that, despite higher firm concentration in Canada, the U.S. banks had higher net interest margin rate, paid a lower rate of interest on funds, and had higher credit losses per financial assets. If the U.S. banking system is more competitive, this questions whether an increase in bank competition will create a net positive outcome for society.
    Keywords: Bank, Commercial Banks, Financial Intermediaries, Retail Bank, Canada, Canadian
    JEL: G21 L89
    Date: 2017–04
  5. By: Peter K. Kruse-Andersen (Department of Economics, University of Copenhagen)
    Abstract: R&D-based growth models are tested using US data for the period 1953-2014. A general growth model is developed which nests the model varieties of interest. The model implies a cointegrating relationship between multifactor productivity, research intensity, and employment. This relationship is estimated using cointegrated VAR models. The results provide evidence against the widely used fully endogenous variety and in favor of the semi-endogenous variety. Forecasts based on the empirical estimates suggest that the slowdown in US productivity growth will continue. Particularly, the annual long-run growth rate of GDP per worker converges to between zero and 1.1 pct.
    Keywords: Endogenous growth, semi-endogenous growth, total factor productivity (TFP), research and development (R&D), time series econometrics, cointegration
    JEL: C32 E24 O31 O41 O47 O51
    Date: 2017–04–06
  6. By: Gabriel Ivan Fuentes Cordoba
    Abstract: This study estimates the e ects of land property rights on agricul- tural productivity in Panama. By using district-level panel data from 1990 to 2010, I find that land privatization increases rice yield in agri- cultural labor-intensive districts, but does not have any significant impact in non-agricultural labor-intensive districts. Then, by using household-level data, I find that households with registered land titles are more likely to obtain an agricultural loan and undertake land- attached and land mobile investment. (JEL O13, O15)
    Date: 2017–03
  7. By: Clive Bell
    Abstract: This paper re-examines the validity of using expected values to evaluate the social profitability of public investments under uncertainty. Departing from the usual assumption of an aggregate good, the setting is a small open economy that faces stochastic world prices for tradable goods and productivity levels in domestic production. It is shown that the so-called ‘border price rule’—the vector of the shadow prices of traded goods is a scalar multiple of their world price vector—is, in general, invalid when the vector of mean world prices is used. The rule in that form is valid when the coefficient of risk aversion is 1. The error involved is small, however, even for values of that coefficient far from 1, including risk neutrality, when public expenditures are financed by lump-sum taxes. It is also small when preferences over goods are Cobb-Douglas and revenues are raised by taxing commodities. In contrast, using expected values to derive the shadow wage rate results in quite substantial errors when risk aversion is strong.
    Date: 2017
  8. By: Evan Borkum; Anitha Sivasankaran; Jane Fortson; Kristen Velyvis; Christopher Ksoll; Elena Moroz; Matt Sloan
    Abstract: In this report we describe the designs for two evaluations of the MCC-funded Fruit Tree Productivity Project in Morocco: (1) an evaluation of the modern olive oil processing units funded by the project, and (2) an evaluation of the project’s investments in irrigated olive and date areas.
    Keywords: Morocco, agriculture, trees
    JEL: F Z
  9. By: Bornmann, Lutz; Wohlrabe, Klaus
    Abstract: The excellence shift is proposed, which shows universities’ ability to produce highly cited papers as measured against their basic academic research efficiency (ARE). To demonstrate our approach, we use data from 50 US universities.
    Keywords: Efficiency, high-impact papers, excellence shift
    JEL: A1 A12 I21 I23
    Date: 2017–05–12
  10. By: Bell, Andrew R.; Ward, Patrick S.; Ashfaq, Muhammad; Davies, Stephen
    Abstract: In the face of increasing environmental stresses, there is a critical need to improve water-use efficiency in many arid and semiarid agroclimatic zones. Drip irrigation is a high-efficiency irrigation technology that can improve water-use efficiency in currently irrigated areas and transform areas that are not otherwise irrigable in practice. Although adoption of drip irrigation is growing rapidly in India, adoption is low in neighboring Pakistan. The authors of this paper undertook a discrete choice experiment framed around the hypothetical subsidized purchase of a drip irrigation system in four districts of Punjab, Pakistan. The nonrepresentative sample of adopters and nonadopters in the study districts identified a clear increase in the valuation of drip systems in the first several years following adoption. This finding suggests that farmers may be unaware of the opportunities for the use of drip irrigation on their farms or the benefits that may accrue from such use. In addition, farmers’ aspirations for cropping systems under drip were better predictors of the valuation of drip systems than were current cropping patterns, implying that a different agricultural landscape might reasonably emerge under improved adoption of drip. Aspirations differed across the different agroecological zones and water regimes captured by this study. Aspirations to substitute wheat crops for fruits and vegetables were associated with a higher appreciation of the subsidy level, whereas aspirations to expand wheat were associated with a higher appreciation of the area covered by the drip initiative; together, these findings imply a degree of control over the extent of wheat production in the landscape via careful design of the drip subsidy program. Although the penetration of drip irrigation is not yet sufficient to draw inferences from a representative sample, these results suggest a number of ways in which drip irrigation may transform Pakistan’s agricultural landscape
    Keywords: trickle irrigation; irrigation systems; experimentation; water supply; water use efficiency, choice experiment; Punjab Irrigated-agriculture Productivity Improvement Project (PIPIP); drip irrigation,
    Date: 2017
  11. By: Collier, Paul; Venables, Anthony J
    Abstract: High productivity in cities creates an economic surplus relative to other areas. How is this divided between workers and land-owners? Simple models with homogenous labour suggest that it accrues largely - or entirely - in the form of land-rents. This paper shows that heterogeneity of labour in two main dimensions (productivity differentials and housing demands) radically changes this result. Even a modest amount of heterogeneity can drive the land share of surplus down to 2/3rds or lower, as high productivity and/or low housing demand individuals receive large utility gains. In a system of cities the sorting of workers across cities mean that the land-rent share of surplus is lowest in the largest and most productive cities.
    Keywords: cities; Land rent; productivity; sorting; wages
    JEL: R1 R10 R2
    Date: 2017–04
  12. By: Jiang, Xuanchao; Hermes, Niels; Meesters, Aljar (Groningen University)
    Date: 2017
  13. By: Buiatti, C.; Duarte, J. B.; Saenz, L. F.
    Abstract: We explain labor productivity differences of the service sector between Europe and the U.S. through the labor allocation taking place within the service sector. We measure labor productivity using a multisector structural transformation model that decomposes services into 11 sub-sectors comparable across Europe and the U.S. We identify wholesale and retail trade as well as business services to be the two sectors responsible for most of the lack of catch-up in labor productivity between Europe and the U.S. We also investigate which institutional characteristics are associated with the different performances of sectoral productivity across sectors. We empirically explore our country-sector panel measures of labor productivity levels, and our results suggest that differences in taxation, pro-business attitudes, ICT diffusion and rates of innovation are disproportionally correlated with the productivity of wholesale, retail and business services relative to the rest of the sectors in the economy.
    Keywords: Structural Transformation, Service Sector, Nonho-mothetic CES preferences, Labor Productivity.
    JEL: O41 O47 O57
    Date: 2017–01–27
  14. By: Pedro Neves (Universidade da Beira Interior and CEFAGE-UBI); Tiago Sequeira (Universidade da Beira Interior and CEFAGE-UBI)
    Abstract: The production of knowledge has been subjected to quantitative analysis following the development of the R&D based endogenous growth theory. There is a spirited discussion about the empirical validity of the semi-endogenous or endogenous (Shumpeterian) growth theories, with clear policy relevance. While the first theory points out ineffective policies in the long run, the latter allows for important effects of fiscal policies, namely subsidies or taxes to R&D. We survey the empirical literature on this topic and implement a meta-analytic regression for the spillover effect, which crucially determines the validity of those theories. We discover that the average spillover effect is lower than one but with the upper bound of the confidence interval above one. We also find that the spillover effect tends to be higher once patents are used to measure knowledge and the estimation of knowledge production accounts for foreign inputs and time-effects; it tends to be lower when the sample includes more countries, only rich economies and industrial data, and when estimations use instrumental variables. Although most recent contributions argue in favor of the Shumpeterian growth theory, we show that when looking at a more complete picture, semi-endogenous theory cannot be neglected.
    Keywords: Semi-endogenous growth; Shumpeterian growth; Knowledge production function; R&D; National innovative capacity; Research policy.
    JEL: O10 O30
    Date: 2017
  15. By: Tamara Vovchak
    Abstract: This paper provides evidence about the transmission of banking sector problems to the real sector, and examines the impact of bank credit supply frictions on firm performance. I exploit differences in the composition of banks' liabilities structure during the financial crisis of 2007-2009 as a source of exogenous variation in the availability of bank credit to nonfinancial firms, in order to identify the causal relationship between bank credit supply and firm performance, measured by firms' stock returns. My evidence indicates that banking relationships are important for firms. Firms whose banks relied more on core deposit financing had a lower decline in bank credit during the crisis than those whose banks were mainly financed by noncore sources of funding. I document a positive relationship between changes in bank credit and firms' stock returns during the crisis: a one standard deviation decline in bank credit to a firm causes a stock return reduction of 3.5 percentage points, while firms that had lending relationships with healthier banks had a lower decline in bank credit and thereby lower reductions in their stock returns during the crisis.
    Keywords: bank credit; bank liquidity shock; financial crisis; relationship lending; firm financial constraints; firm performance;
    JEL: E44 G21 G32 L25
    Date: 2017–03

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.